Building a services company through the cloud and IIoT
GE Digital CEO Bill Ruh talked about how the company has formulated its own digital strategy with the rise of the Industrial Internet of Things (IIoT) and how business is becoming driven by operational expenditures (OPEX) rather than capital expenditures (CAPEX).
In his opening keynote at Smart IoT London exhibition, GE Digital CEO Bill Ruh said that the promise of the Industrial Internet of Things (IIoT) has been somewhat long in the tooth; the idea of connected machinery was first dreamed up in the late 1990s but has only now gained serious traction as companies are changing how we see and use technology—and how companies do business. This shift, said Ruh, made GE formulate its own digital transformation strategy.
"If you look at the companies that are doing well in this whole Internet revolution, there some interesting things we look at and say, 'What have they really done? The idea that Airbnb, Uber, and Apple can create huge businesses on assets, and not have to own these assets, is actually counter intuitive to way business been running for last few hundred years. In fact, we evaluate companies' worth on assets they have," Ruh said. "People are now valuing companies not on who brings them assets, but who can bring the best outcome on that asset. Efficiency is the central point of value creation rather than the asset itself. Creating experience around the asset—that is much more compelling."
Transformation through analytics
Ruh, who is also senior vice president (SVP) and chief digital officer (CDO) at GE, charts how GE's digital transformation first came about after observing that the industrial market was shrinking rapidly, declining from an annual year-on-year growth of 4% to just 1%. The market was shifting, and data was now key to generating revenue. Mentioning how widespread connectivity has made "dumb"
devices smart, from the ordinary light bulb to the sophisticated car, Ruh said: "All of them are becoming connected... and the data will always be there. So the real question is—who will take advantage of it?
"We realized about 5 years ago that we needed to position ourselves, because one thing we believe is we have to be the best at providing efficiencies and outcomes on that machine, or someone else will."
He added that it would be "shame on you" if manufacturers weren't leveraging data coming off their gas and wind turbines to improve their services. The key to digital business today Ruh said, is about "mastering data and insights."
"You've got to have the data, and you've got to be able to manage data," Ruh said. "We were processing one terabyte (1TB) a day on all machines globally ten years ago, now it's 10,000 TBs a day. It will be one million terabytes a day off machines by 2020. The only question for us who's going to deliver great outcomes on that?
"You've got to restart with a business model and rethink what you sell." Ruh said that the old licensing model in manufacturing no longer works, with the shared economy pushing suppliers to a consumption-based, cloud-based approach that is driven by operational expenditures (OPEX), rather than capital expenditures (CAPEX).
The IIoT and GE
This transformation arguably stems from CEO Jeff Immelt declaring (back in 2011) that GE needed to evolve into a software-and-analytics company, rather than lettings its industrial machines become mere commodities. Immelt set an ambitious target of $15 billion in software revenue by 2020.
Ruh detailed how the firm "rethought manufacturing" through the IIoT, from making turbines that were faster and lower-cost, to driving its 75 million factories to achieve better yield, less downtime and faster production cycles.
What's more, he said that these three can be integrated in a "digital thread" for general business efficiency, ensuring, for example, that engineers can get to fix a product before it breaks down.
"It's the land of machines... if you can figure out how to use less resources, make services more reliable and more safe, you can make IoT a revenue generator for any company," Ruh said.
Healthcare is another huge opportunity, with Ruh describing how the Internet of Things (IoT) could become the input for health records, letting doctors concentrate on the patients.
"This is the poster child case for IoT and where the world is going," Ruh said. "Machines will be the producers of information on record."
Barriers to IIoT adoption
Ruh stressed that this digital innovation in industrial manufacturing is not easy for a sector steeped in legacy culture and systems. He cited old licensing models, assets versus services as well as the newer argument over digital versus IT as potential roadblocks to driving change and embracing IIoT.
"Digital and industrial is a recipe for failure; you just created an organization to go fast, with a bureaucracy over it."
Ruh added that the business transformation requires "An entirely new talent basis that most people don't have" and notes the challenges with legacy enterprise resource planning (ERP) systems and on-premise data systems, especially as IT struggles with the move to data analytics platforms and hybrid cloud solutions.
"This is a huge challenge because traditional IT organization is really optimized to think this way, invested in this architecture, and challenged to move over to this because the way world works."
Doug Drinkwater is editor at Internet of Business, which is hosting the Internet of Manufacturing Conference November 1-2, 2016, in Chicago. This article originally appeared here. Internet of Business is a CFE Media content partner. Edited by Chris Vavra, CFE Media, firstname.lastname@example.org.
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